IT Industry News – November 2019

Five years ago, November 2014 was an exceptionally quiet month on the M&A front with the largest deal being the merger of two semiconductor companies, Cypress Semiconductor and Spansion to form a $4 billion company; private equity company Carlyle Group paid $700 million for investment bank technology company Dealogic and Yahoo shelled out $640 million for video advertising company BrightRoll.

November 2015 saw Expedia pay $3.9 billion for HomeAway as a vehicle to better compete with Airbnb. Zayo Holding Group became the first foreign company to own a Canadian telco after paying $465 million for Allstream. Other smaller deals saw Apple buy Faceshift, a motion capture company whose technology was used in a Star Wars movie; and Lightspeed POS bought SEOshop, increasing its size as a competitor to Shopify. Other deals saw Ingram Micro grow its Brazilian presence with the purchase of ACAO; PCM bought Edmonton based services firm Acrodex; Data centre company CentriLogic bought infrastructure company Advanced Knowledge Networks; solution provider Scalar Systems bought another Toronto company, professional services firm Eosensa; and Washington-based New Signature bought Toronto-based Microsoft Partner, Imason.

Two years ago, in November 2017, the big M&A activity for the month saw investment firm Thoma Bravo pay $1.6 billion for Barracuda networks. McAfee also made an acquisition of Skyhigh Networks. Smaller deals saw Talend buy Restlet and Qualys buy Netwatcher.

Last year, November 2018 was a busy month in the M&A space, with lots of action! The largest deal saw SAP shell out $8 billion for experience management company Qualtrics. Not far behind was Commscope paying $7.4 billion for telecommunication equipment maker Arris. Vista Equity partners paid $1.94 billion for cloud software company Apptio; and private equity fund CVC paid $1.8 billion for a global IT and managed services provider, ConvergeOne Holdings. The final billion-dollar deal saw Blackerry make its largest acquisition, paying $1.4 billion for AI cybersecurity startup Cylance. In other deals, Thoma Bravo bought security testing vendor Veracode for $950 million; LinkedIn paid $400 million for a surveying startup, Glint; power management company Eaton paid $300 million for Turkish company Ulusoy Elektrik; and Citrix shelled out $200 million for intelligent portal company Sapho. There were plenty of big name companies out shopping with no price tag named: Accenture bought a German design agency Kolle Rebbe; Apple bought AI company Silk Labs; HPE bought big data company Bluedata; Oracle bought Talari Networks; Cisco bought networking company Ensoft; Microsoft bought another AI company, startup XOXCO; Red Hat (recently purchased by IBM) bought storage startup NooBaa; VMware bought Kubernotes startup Heptio; Symantec bought a couple of companies, Appthirty and Javelin Networks; and DXC bought a couple of companies TESM and BusinessNow.

Which brings us back to the present

November 2019 saw quite a few big dollar deals. The biggest saw Apollo Global taking TechData private in a deal worth $5.4 billion. eBay sold its Stubhub subsidiary to Viagogo for $4.05 billion; Xerox is selling its stake in Fuji Xerox such that Fujifilm will own the whole entity at a cost of $2.3 billion; Google paid $2.1 billion for Fitbit; and Opentext paid $1.4 billion for security company Carbonite. That is a lot of billion-dollar deals for one month!

Other deals saw Proofpoint pay $225 million for threat management company ObserveIT; DXC picked up solution providers, Virtual Clarity and Bluleader; Rackspace bought professional services company Onica, and Mimecast picked up DMARC Analyzer.

One other company in the news was Cognizant, who announced it would be laying off between 10,000 and 12,00 employees.

Economic and jobs news around the world was a little mixed, with signs of things slowing in most countries. Canada lost jobs in October, despite a big boost in public sector hiring. The US had decent job numbers, but signs were less positive moving forward. Of course, less positive, does not mean negative!

Some interesting reports this month, with Canada’s privacy commissioner pointing out that 28 million Canadians were affected by corporate hacks or mismanagement. Pretty interesting for a country with a population of 37.5 million! Two separate AI reports suggest different impacts on jobs into the future; The Brookings Institute suggesting Higher paid workers will be the most impacted; and Jim Goodnight suggesting it will be the factory floor most impacted.

One final piece of news and a little plug, as the Global Power 150 list of Women in Staffing was released, with Eagle’s CEO Janis Grantham on the list.

General Interest

In the last 12 months, the personal information of approximately 28 million Canadians was affected by corporate hacks or mismanagement, according to the Office of the Privacy Commissioner of Canada (OPC). That number of impacted victims includes the huge breaches at Quebec-based Desjardins Group’s credit unions, and the roughly 6 million Canadian’s victimized by the breach at U.S.-based credit card issuer Capital One.

Artificial intelligence will have a different effect on workers than other technologies in the workplace such as robotics, according to the report by The Brookings Institution titled "What jobs are affected by AI?" Better-educated, higher-paid workers will be the most impacted.

One of the biggest impacts of artificial intelligence on the workforce will be on the factory floor, Jim Goodnight, whom some consider the Godfather of AI, told CNBC. "The largest impact will be felt in the manufacturing industry on the factory floor," Goodnight told CNBC. "Robots with computer vision will become more sophisticated. The process has already begun; there are huge numbers of industrial robots already. Over the years, robots will take on many roles in the factory. Humans will be needed to maintain and program them."

Despite growing calls for gender diversity, the number of women CEOs in the S&P 500 fell by nearly 20% in 2018, according to a report published by The Conference Board, with support from executive search provider Heidrick & Struggles (NASD: HSII). At the end of 2018, women held 22 CEO positions in the S&P 500, down from a record 27 in 2017, according to the report. Last year, just one additional woman joined the CEO ranks: Kathy Warden of Northrop Grumman.

Switzerland leads the IMD World Talent Ranking 2019 while Denmark ranks in second place. Singapore was the only non-European country to feature in the top ten this year. Sweden, Austria, and Luxembourg rounded out the top five. Meanwhile, Norway, Iceland, Finland, The Netherlands and Singapore rounded out the rest of the top ten.

The Global Power 150 — Women in Staffing List was released by Staffing Industry Analysts. In its fifth year, the list includes 100 of the staffing industry’s most influential women in the Americas and 50 in the global staffing industry. Eagle’s Janis Grantham was on this list.

Global Job Markets

The economy – Canada

Employment in Canada fell by 22,600 jobs in October from September, according to ADP. Additionally, job gains in September were revised downward to 25,700 jobs from the previously reported gain of 28,200 jobs.

The Canadian Staffing Index remained at a reading of 120 in October, unchanged from its year-ago reading. The index is released by the Association of Canadian Search, Employment and Staffing Services.

The number of jobs in Canada edged down by 1,800 in October for total employment of nearly 19.2 million, according to seasonally adjusted data released by Statistics Canada. A gain of 14,300 part-time jobs was more than offset by a loss of 16,100 full-time jobs. Despite the decline in employment overall, the public sector added 28,700 jobs. On the other hand, private-sector employment fell by 2,700 jobs and the number of self-employed fell by 27,800. Canada’s unemployment rate was 5.5% in October, unchanged from September.

A study by the nonprofit Angus Reid Institute found that 17% of Canadians are involved in the gig economy with another 17% saying they have been involved with it in the past five years. Earning extra money, cited by 53%, was the main reason for taking part.

The economy – US

The Conference Board Leading Economic Index for the US fell 0.1% in October to a reading of 111.7 (2016 = 100), following a 0.2% decline in both September and August.

US employers plan to hire 5.8% more college grads from the class of 2020 for positions in the US than they did from the prior year’s class, according to the "Job Outlook 2020" survey released by the National Association of Colleges and Employers.

Engineering employment fell 0.18% in October compared to September for total employment of near 2.7 million, according to the TechServe Alliance, a trade association of the IT and engineering staffing and solutions industry.

Technology jobs fell by 0.03% in October compared to September for total employment of approximately 5.4 million, according to the TechServe Alliance. However, IT employment still edged up by 0.09% year-over-year, which represents 4,800 IT workers on a net basis.

The outlook for US economic growth over the next four quarters looks weaker now than it did three months ago, according to the Survey of Professional Forecasters by the Federal Reserve Bank of Philadelphia. Forecast growth in real GDP was revised to growth at 1.7% in this quarter, down from the previous forecast of 2.0%. Real GDP growth for the full-year 2019 is still projected to be 2.3%.

Executives are slightly less optimistic about the business climate in 2020 and concerned about talent acquisition, according to the Employer Associations of America’s 2018 National Business Trends Survey.

Baby boomers are the fastest-growing segment of the US workforce, according to a report by Glassdoor. The workforce of those born between 1944 and 1964 is expected to grow 61% over the next decade, according to the report. In comparison, the total workforce is expected to grow 5.5%.

The US cybersecurity workforce needs to grow by 62% to close the skills gap, according to research by (ISC)², a nonprofit membership association of cybersecurity professionals. It estimates the US currently has 804,700 cybersecurity professionals, but the country needs 498,480 more.

Job growth may slow in the coming months despite the latest better-than-expected jobs report, according to The Conference Board Employment Trends Index. The index fell to a reading of 110.11 in October from a downwardly revised reading of 110.87 in September.

The Institute for Supply Management’s manufacturing purchasing managers’ index contracted for the third consecutive month in October, but the rate of contraction was slower than in September. In October, the PMI was at a reading of 48.3, up from September’s reading of 47.8. The readings indicated a contracting manufacturing economy; readings higher than 50 indicate the manufacturing economy is expanding.

Growth in US gross domestic product for the third quarter was revised upward to an annual rate of 2.1%, according to a third estimate released today by the US Bureau of Economic Analysis. An advance estimate of third-quarter GDP released last month indicated growth of 1.9%.

Consumer confidence decreased slightly this month, following a slight decline in October. The Conference Board Consumer Confidence Index edged down to a reading of 125.5 in November from 126.1 in October. Consumer confidence declined for a fourth consecutive month, driven by a softening in consumers’ assessment of current business and employment conditions, according to Lynn Franco, senior director of economic indicators at The Conference Board.

The economy – Outside Canada and the US

Global GDP is expected to be 2.9% this year, down from 3.5% in 2018 and the lowest annual rate since the financial crisis, according to the Economic Outlook report from the Organisation for Economic Co-operation and Development. Growth is forecast to remain at 2.9% in 2020 and is estimated to rise to 3.0% in 2021.

The seasonally adjusted unemployment rate in Australia stood at 5.3% in October 2019, an increase of 0.3% when compared to the same period last year, according to data from the Australian Bureau of Statistics. The total number of unemployed people stood at 726,100 in October 2019, up 17,100 when compared to the previous year.

The majority, or 84%, of Indian organizations are expecting a hiring surge in the coming 12 months, according to a report from background screening firm HireRight. HireRight’s report, ‘2019 India Employment Screening Benchmark Report’, found that fewer companies in India anticipate any form of decline in their workforce this year compared to the last report (11% in 2019 versus 13% in 2018).

The seasonally adjusted unemployment rate in Hong Kong increased from 2.9% in the period from July to September 2019 to 3.1% for the period from August to October 2019, according to the latest labour force statistics published by the Hong Kong Census and Statistics Department.

Employment increased by 1.0% in the euro area and by 0.9% in the EU28 in the third quarter of 2019, when compared to the same period last year, according to data from Eurostat, the statistical office of the European Union. When compared to the previous quarter, the number of persons employed increased by 0.1% in both the euro area and in the EU28.

Compared with the same quarter of the previous year, seasonally adjusted GDP rose by 1.2% in the euro area and by 1.3% in the EU28 in the third quarter of 2019.

Malaysia’s jobless rate stood at 3.3% in the third quarter of 2019, unchanged when compared to the second quarter of 2019, according to data published by the Department of Statistics Malaysia.

The number of job vacancies in Ireland decreased by 8% during the third quarter of 2019 when compared to the same period last year, according to the Q3 2019 IrishJobs.ie Jobs Index.

Hiring activity in India rose by 2% in October 2019 when compared to the same period in 2018, according to the Naukri JobSpeak Index.

Employment growth for formal-sector jobs in Mexico bounced back in September, according to an economic update released by the Federal Reserve Bank of Dallas. However, the unemployment rate for Mexico rose to 3.5% in September from 3.4% in September 2018.

Ongoing political uncertainty in the UK impacted recruitment activity in October, according to the latest Report on Jobs from the Recruitment and Employment Confederation and KPMG. Permanent staff appointments fell, which was widely linked to Brexit-related uncertainty, as many employers had chosen to cancel or postpone hiring until there was greater clarity over the outlook.

New Zealand’s seasonally adjusted unemployment rate rose to 4.2% in the September quarter, up from 3.9% last quarter, according to data from Statistics New Zealand.

India’s unemployment rate increased to a three-year high of 8.48% in October, up from 7.16% in September, according to data published by the Centre for Monitoring Indian Economy. This is the highest rate since August 2016, reflecting an economic slowdown in the country. At the same time, CMIE data showed that employment in India increased by 2.5 million between May and September 2019.

Japan‘s unemployment rate stood at 2.4% in September 2019, steady when compared to the same period last year, according to data from Statistics Japan.

Employer confidence in the UK economy fell to its lowest level since mid-2016, according to the Recruitment & Employment Confederation’s "JobsOutlook" report. It covers the three months from August to October.

Company News

IT services firm Cognizant Technologies Corp. will be laying off as many as 10,000 to 12,000 employees in the coming months, the Times of India newspaper reported. The report was based on a letter by CEO Brian Humphries. It was earlier reported that Cognizant was getting out of the content moderation business, which scans web postings for objectionable content and counts Facebook as a customer. Humphries’ letter said that decision would affect approximately 6,000 roles

Distribution giant Tech Data has agreed to be acquired by Apollo Funds for $5.4 billion in a distribution game changer that will take the company private. Following the close of the transaction, Rich Hume will continue to lead Tech Data as chief executive officer, and the company will continue to be headquartered in Clearwater, Fla. Tech Data will become a privately-held company, and Tech Data’s common shares will no longer be publicly listed.

After a lengthy consultation period sparked by hedge fund and activist investor Elliott Management, eBay has confirmed that it’s offloading its ticket marketplace StubHub to Viagogo in an all-cash deal worth $4.05 billion.

Fujifilm will buy Xerox’s remaining ownership in Fuji Xerox for $2.3 billion and drop a $1 billion breach of contract suit against the American copier, the last vestige of the failed merger between the two companies. While the 57-year-old partnership of Fuji Xerox will now be wholly owned by Fujifilm, it will continue to supply Xerox after the transaction.

Google paid $2.1 billion for wearables tech firm Fitbit. "More than 12 years ago, we set an audacious company vision — to make everyone in the world healthier. Today, I’m incredibly proud of what we’ve achieved towards reaching that goal. We have built a trusted brand that supports more than 28 million active users around the globe who rely on our products to live a healthier, more active life," said James Park, the co-founder and chief executive officer of Fitbit, in the press release. "Google is an ideal partner to advance our mission. With Google’s resources and global platform, Fitbit will be able to accelerate innovation in the wearables category, scale faster, and make health even more accessible to everyone. I could not be more excited for what lies ahead."

DXC Technology stepped up its digital transformation services offensive by acquiring cloud migration solution provider Virtual Clarity. Virtual Clarity, with offices in London and New York, offers a portfolio of services focused on helping businesses better understand their data and how to use it to help them provide more effective IT services.

IT services solution provider DXC Technology has made yet another acquisition, this time of Australia-based Bluleader. Bluleader is a North Sydney, New South Wales, Australia-based systems integrator and consulting partner focused on customer relationship management, marketing automation, field service management and commerce solutions and works closely with Microsoft and SAP. The company specifically focuses on the customer experience across the different areas.